J. Scott Miller, Esq.
The Los Angeles County Bar Association’s Professional Responsibility and Ethics Committee recently issued an advisory opinion addressing the tripartite relationship among insurers, their insureds and defense counsel. Op. No. 528, April 2017. (See also, Bank of America, N.A. v. Superior Court of Orange County (2013) 212 Cal.App.4th 1076 [discussing the tripartite relationship]; State Farm Mut. Auto. Ins. Co. v. Federal Ins. Co. (1999) 72 Cal.App.4th 1422, 1429 [same]).
The committee considered a scenario in which an insurance carrier assigns panel defense counsel to defend an insured client. The insurer provides documents to defense counsel that include a complaint and a reservation of rights letter suggesting the possibility that the insured client had knowledge of the claim before it applied for the policy and failed to disclose that knowledge on its insurance application. Defense counsel files an answer and then is served with requests for admission, including one request seeking to have the insured client authenticate a mea culpa letter and admit the date it was sent to the plaintiff. The mea culpa letter, as it turns out, pre-dates the insurance application. The letter’s date may establish a statute of limitations defense because it shows the date on which the plaintiff was aware of facts supporting the claim, but it also may invalidate coverage by showing that the insured client knew of this potential claim at the time it submitted its insurance application to the insurer and failed to disclose this information on the application.
According to the committee, defense counsel in this situation is ethically prohibited from disclosing the existence of the mea culpa letter to the carrier. However, because the letter supports the insured client’s statute of limitations defense, its existence would need to be disclosed to the insurer. As such, the attorney must withdraw from the representation.
To read the full opinion, click HERE.